Being a new parent comes with a lot of decisions. From picking the right stroller and car seat to the perfect name, making the right choices can be stressful. We hate adding to your parental to-do list, but now is the time to add some financially-related tasks to your list as well.
- Add Your Child to Your Health Insurance
It seems like a no-brainer, but this task can get overlooked in all of the chaos that comes with a new baby. Most health insurance plans want you to add your new bundle of joy within 30-60 days of delivery. Check with your insurance company and get that baby covered!
- Update Your Life Insurance
First, if you don’t already have life insurance – having a baby is an excellent reason to get one now for you and your spouse. This will protect your family when they need it most. Thankfully, life insurance is usually downright affordable. Many financial institutions, like WWFCU, can give you access to discounted policies. If you already have a policy, be sure to make your child a beneficiary.
Accounts and Forms
- Health Savings Accounts
If your employer offers a health savings account (HSA), and you already take part, you may want to adjust your contributions. An HSA lets you use pre-tax dollars to pay for a variety of health-related expenses like co-pays, infant formula, breast pumps and more.
- Get or Update Your Will
Nobody likes to think about a time when they won’t be around, but now that you have a little one, you’ll want to make sure they’re covered by having a will.A will not only lists beneficiaries when you pass, but also states who you wish to be guardians if your children are under 18. Work with an attorney to update these things or to create a will if you don’t already have one.
- Tax Time
Once tax time rolls around, you’ll see the financial benefits of having a child – the Child Tax Credit. The IRS also gives you credit for childcare with the Child and Dependent Care Credit. Be sure your tax planner is aware of your latest family addition or, if you file yourself, don’t miss these important credits on your return.
- Important Records
Once your baby is born, make sure you receive paper copies of key records such as the birth certificate, Social Security card and immunization record. You’ll need three copies of the birth certificate – one for you, one for your child to have later in life and one for a guardian. The Social Security card will arrive by mail. And the immunization record is vital if you’ll be putting your child in daycare. Be sure to keep all of your important documents in a fireproof safe.
Budgets and Savings
- Change Your 401k
Update the beneficiaries on your 401k to include your new baby. You may want to reconsider what your contributions are as well. It never hurts to save more when you can.
- College Savings
Sure, they’re just in diapers. But that doesn’t mean you shouldn’t start planning for their college education now. A 529 college savings account may be a great option for you. They grow tax-free and aren’t taxed when money is withdrawn as long as you use it to pay for qualified education expenses. According to the U.S. News, it currently costs $9,716 to $35,676 per year to send a kid to college – so start saving now. Speak to a financial planner to weigh your college savings options.
- Revisit Your Debt
Ideally, this should be handled as soon as you find out a baby is on the way. Do everything you can ahead of time to reduce your debt by as much as possible. Switch high-rate credit cards for lower rate ones, consolidate your debt into a low-rate loanand make more than your monthly payments till at least the baby arrives.
- Revise Your Budget
You’ll soon be amazed at how something so tiny can cost so much! The USDA states it costs $233,000 to raise a child. Chances are, your budget could use some tweaking now that you have new family member. Diapers, formula, clothing and childcare can make a big dent in your finances. Experts recommend upping your monthly budget by at least 10% to accommodate these growing expenses.
- Increase Your Emergency Fund
This is another one of those “if you don’t have one, get one” scenarios now that you’re a new parent. You want to make sure you’re financially covered in case of an unforeseen emergency or unexpected layoff. Most experts recommend having 6-12 months’ worth of expenses in your emergency fund. But start with whatever you can afford. Learn more about emergency funds here.
We’re not saying you have to do all of this today, but it’s good to review best recommendations and start from there. Be sure to speak to your accountant, tax expert or financial planner to make the choices that are right for you and your new family.